How RDI investments act as an engine for sustainable growth?

Blog post
Laura Juvonen

We are living in the midst of major transformations: climate change, sustainability crisis and geopolitical situation are challenging global development. On a national scale, slow productivity development combined with the deteriorating dependency ratios jeopardise the financing of the welfare state. Even if in times of uncertainty we would like to ensure, put investments on ice and press the emergency brake, now more than ever we need to increase our efforts in the development of novel solutions. Adequate and efficiently allocated funding for research, development and innovation will determine the direction of our future.

In the final report of the Parliamentary RDI Working Group in December 2021, all parliamentary groups are committed to increase RDI expenditure to 4 percent of gross domestic product by 2030. The legislative proposal for a new RDI funding law has now been prepared, and in addition, a statutory plan for the allocation of funding over an eight-year period is in the pipeline. The choices at hand now have a significant impact on the development of Finland's ability to innovate.

Cooperation between research and companies deteriorates

World-class basic research is carried out in Finland. However, too rarely its results are transformed into ideas that companies could grasp and from which society as a whole would benefit. Putting the results of cutting-edge research into practice is often a laborious phase requiring cooperation between multiple parties, and it is often getting too little attention. It is not enough that we have knowledge and research, but we must utilize the results to create solutions that are well-functioning in practice and broadly applicable. In the absence of radical innovations, the economy is not renewing, but companies focus on gradual improvement of current solutions. 

Finland's economy will grow through scientific breakthroughs and new innovations based on them. Here, the cooperation between research and companies is indispensable, but unfortunately it has deteriorated throughout the 2010s. In this regard, our innovation system is broken.

Finland's economy will grow through scientific breakthroughs and new innovations based on them.

Efficiently targeted RDI funding ensures sustainable growth

The situation will not change without a stable, predictable, and long-term operating environment. We need the RDI funding law and the steady growth it defines for the RDI funding towards the 4% target. It is a necessary precondition for raising the productivity of the national economy. In addition, further investments are needed to enhance and support the cooperation between research and companies. This must be made a key part of the statutory, longer-term RDI funding plan, which is being drawn up alongside the RDI funding law.

RDI funding must be targeted in such a way that it effectively encourages companies to increase their investments. It should be kept in mind that the private sector is to cover 2/3 of the RDI contributions to achieve the 4% target.

At VTT, we identify four key ways to promote research-company cooperation:

  1. Launching long-term innovation programmes based on strategic choices. Funding is directed towards innovation partnerships between research and companies, which co-develop research results into new solutions and services. 
  2. Filling the gap in applied research funding by increasing RDI funding targeted for research-company cooperation. 
  3. Making full use of EU funding. This requires adequate national matching funding for Finnish actors.
  4. Correcting the weakened level of direct government funding for research institutions. This will maintain the conditions for creating new expertise and IP.

National level strategic choices guiding RDI funding need to be made in such a way that they broadly support the strengthening of expertise hubs, technological development, development of new solutions, industrial scaling-up and participation in international networks. It is essential that both the public and private sectors are committed to the objectives and strongly increase their investments. 

Increasing RDI funding means an investment in the sustainable growth of Finland's economy. A lot of good will result from this: competitiveness will improve, productivity will increase, innovation activity will accelerate, and our economy will be renewed even faster. Effective allocation of funding is the best way to ensure that these societal benefits are achieved.

Laura Juvonen
Laura Juvonen
Senior Vice President, Strategy
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